Here are 5 important considerations for the distribution in China, which you should keep in mind
Guanxi This is a Chinese word describing relationships on every level. Wikipedia describes it as: “Guanxi (Chinese: 關係) defines the rudimentary dynamic in personalized social networks of power (which can be best described as the relationships individuals cultivate with other individuals) and is a crucial system of beliefs in Chinese culture. In Western media, the pinyin romanization of this Chinese word is becoming more widely used instead of the two common translations of it—”connections” and “relationships”—as neither of those terms sufficiently reflects the wide cultural implications that guanxi describes.” Especially in China personal networks and relationships are an important aspect of a successful distribution strategy. Chinese networks are often restricted and not quickly to build, but they are essential to develop distribution channels.
Distribution partners Companies must analyze their potential distribution partners, their abilities and structures. It is important that distribution partners can match the expectations and handle the required scale. Poor inventory positioning and stock-outs for example could harm brand reputation.
Fast changing conditions To stay up to date and avoid loosing market share, it is important to always follow trends and changes on the fats moving markets in China. The fast development of e-commerce markets has shown that consumers in China are adapting fast.
Logistics This is a very important process in the supply chain of your distribution. China has a multitude of challenges: Firstly, China has huge structural differences between big cities and rural areas, which you should be aware of. This includes restricted access for large trucks to big cities in certain times, but also the poor logistical coverage of rural areas. Secondly, many distribution platforms rate distributors on their logistical capabilities. Thirdly, logistics in China is a highly fragmented industry – With more than 730,000 registered logistics operators the market is highly competitive.
Efficiency In most cases, responsibility for distribution operations is initially handed over to the distributor without identifying clear procedures and targets. This might become a problem since the size of China can lead to unfocused decision making, and therefore a loss of efficiency. It is especially important to develop a strong distribution strategy with clear targets before entering the Chinese market.